IT’S been a year since the Strata Management Act 2013 (SMA) was implemented in our country. As we should know by now, strata is a form of property ownership and development format that caters for the subdivision of buildings and land to ensure higher density and better efficiency in land utilisation. In simpler words, strata living is a form of community living where it embraces the idea of “love thy neighbours” instead of “my home is my kingdom” by holding several households or different entities under one roof.
The SMA successfully brought forward a number of changes in relation to strata property and living in Malaysia. For example inter-floor leakage now has prescribed procedures to follow with the statutory presumption that the leakage originates from the upper floor parcel unless the owner of the upper floor can prove otherwise. Furthermore, the management body is also allowed to publish a list of defaulting strata owners on the notice board and at the same time cease their access cards and use of common facilities (including parking) until the outstanding sum is paid.
Notwithstanding the above, one of the biggest innovations and sophistication of strata development today is, without any doubt, the further division of Common Property to the concept of Limited Common Property. While the Management Corporation (MC) manages Common Property, the Subsidiary Management Corporation (SMC) manages Limited Common Property to be enjoyed by an exclusive group of owners only, instead of every owner.
The reality is …
Theoretically, the Act is aimed at ensuring harmonious living in mixed-use developments. However, in real life situations, there has not been a successful formation of an SMC to date.
One of the few practical issues faced by strata owners in the formation of an SMC is that there must be a comprehensive resolution of at least 2/3 of the total share units in order to form one. Unfortunately, such a number is almost unachievable as there are a few uncertainties. For example, is it compulsory that votes must be obtained for all share units under the schedule of parcel? Can the votes be obtained from provisional blocks of the subsequent phases; and are unsold units counted as being in favour of the developer?
In addition to the above-mentioned uncertainties, another problem when forming the SMC is the cost. It costs a fortune to hire a surveyor to prepare a special plan for the SMC’s submission and also a lawyer to advice on the process towards comprehensive resolution.
Generally, it costs around an eye-watering hundreds of thousands of ringgit to prepare the special plan and the legal fees. No MC would have that amount of money at its disposal given that collection of service charges are cost based.
On top of that, most MCs do not fancy the idea of the formation of an SMC as there are still many grey areas in the handling of the SMC. One of the problems is, if the SMC is not performing up to par, the MC will struggle to rein it in as the SMC is perceived as a separate legal entity, of which the SMC can only voluntarily dissolve itself, unlike in Singapore, where the MC can dissolve the SMC. Furthermore, there is another problem pertaining to the conflict between MCs and SMCs concerning boundaries, common services and limited common property, as ambiguities may arise from delineation, markings or descriptions.
Despite the above, one of the greatest obstacles to the formation of the SMC is the lack of participation by the owners. This is already a serious problem faced by most MCs as there is always a struggle to get people to sit in the management council; therefore it is even more difficult to get people to sit in the subsidiary management council.
In a nutshell,
Strata living has successfully captured the attention of the authorities but sadly some practical issues still need to be addressed. Perhaps the engagement with stakeholders as well as legislation updates should be done simultaneously. Therefore, strata living in Malaysia is still a work in progress.
Chris Tan is a lawyer, author, speaker and keen observer of real estate locally and abroad. Mainly, he is the founder and now Managing Partner of Chur Associates.
If you have questions that you would like to pose to Chris, please go to the Tips section of www.theedgeproperty.com to pose your questions.
Disclaimer: The information here does not constitute legal advice, please seek professional legal advice for your specific needs.
This story first appeared in TheEdgeProperty.com pullout on Aug 5, 2016, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com pullout here for free.